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In order to provide export credit insurance support to Indian exporters, the Government of India set up the ‘Export Credit Guarantee Corporation of India Limited (ECGC).
Functions of ECGC
- Provides a range of credit risk insurance covers to exporters against loss in export of goods and services,
- Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them,
- Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan.
- Offers insurance protection to exporters against payment risks
- Provides guidance in export-related activities
- Makes available information on different countries with its own credit ratings
- Makes it easy to obtain export finance from banks/financial institutions
- Assists exporters in recovering bad debts
- Information on the credit-worthiness of overseas buyers
The covers issued by ECGC can be divided broadly into four groups:
1. Standard Policy
Shipments (Comprehensive Risks) Policy, which is commonly known as the Standard Policy, is the one ideally suited to cover risks in respect of goods exported on short term credit; i.e. credit not exceeding 180 days. The policy covers both commercial and political risks from the date of shipment.
2. Other Specific Policies
Specific Policies are designed to protect Indian firms against payment risks involved in a) exports on deferred terms of payment b) services rendered to foreign parties and c) construction works and turnkey Projects are undertaken abroad. These policies are issued separately for each specific contract and cover risks normally from the date of the contract.
ECGC provides for an insurance cover named Construction Works Policy to provide cover to an Indian contractor who executes a civil construction job abroad.
3. Financial Guarantees
Financial Guarantees are issued to banks in India to protect them from risks of loss involved in their extending financial support at pre-shipment and post-shipment stages. These also cover a host of non-fund based facilities that are extended to exporters.
Export Performance Guarantee
Export Performance Guarantee is an insurance cover for banks, which issues various kinds of guarantees on behalf of exporters in order to facilitate export transactions
4. Special Schemes
Transfer Guarantee meant to protect banks that add confirmation to Letters of Credit opened by foreign banks, Insurance cover for Buyers Credit and Lines of Credit, and Exchange Fluctuation Risk Insurance.